In 2017, the average student loan debt upon graduation was $28,288. When you borrow that much money, the interest you pay can really add up. If you borrow $28,288 and repay it at 5.05% APR over 10 years, you’ll pay $7,800 in interest, according to our student loan payment calculator. If you have longer repayment plans, you pay even more in interest.
You don’t have to pay all that interest on top of the principal loan amount, though. There are organizations that can help you pay for college without the expense of interest. Here’s how to reduce the cost of your college education with interest-free student loans and other flexible loan options.
On this page:
- Interest on Federal Student Loans
- How to Find Interest-Free Student Loans
- Explore Your Options for Paying for School
Interest on Federal Student Loans
Almost every U.S. citizen is eligible for federal student loans. However, whether you can access them without paying interest depends on your income. Fill out the Free Application for Federal Student Aid (FAFSA) to find out if you qualify for help paying your interest. Your two main options for undergraduate federal student loans are:
- Direct Subsidized Loans: If your FAFSA demonstrates financial need, you might be able to have the government pay your interest while you’re in school. However, once you graduate and the grace period ends, you’re responsible for paying your interest.
- Direct Unsubsidized Loans: Students who aren’t eligible for subsidized loans can get unsubsidized loans. Your interest starts accruing immediately, though, so if you don’t pay interest while you’re in school, you’ll end up having that interest added to your loan at the end of your grace period.
Interest rates on federal loans are set for each year by a formula decided on by Congress. For current undergraduate subsidized and unsubsidized loans, the interest rate is 5.05%.
Your parents might also be able to help you cover your costs by taking out Direct PLUS Loans. However, these loans come with a higher rate of 7.60% so your monthly payment will be even more.
Private lenders and financial institutions that offer student loans often have variable interest rates and these are even higher than what’s available with federal student loans. Private student loan approval is also based on credit history, and that can play a big role in how much the interest rate is.
How to Find Interest-Free Student Loans
Since it’s difficult to get access to interest-free student loans through the federal government, you might need to look elsewhere to save money on student loan rates. Some of the places you can look include:
- Nonprofit organizations
- Private companies
- State government organizations
- Religious organizations
- College financial office
- Sorority or fraternity
Carefully check your affiliations and geography. You might be surprised at what’s available to you because you have a certain membership, practice a specific religion, or live in a certain region.
If you’re looking for help covering the cost of college, here are some of the organizations that offer interest-free student loans:
Abe and Annie Seibel Foundation
If you’re a Texas high school graduate attending an accredited college or university in Texas, you might be eligible for the Abe and Annie Seibel Foundation program. Requirements include:
- Ranking in the top 10 percent of your high school graduating class, or having at least a 1100 SAT or 23 ACT score
- College students must maintain a 3.0 GPA
Funds are limited, and approved on a first come, first serve basis. Application packets are accepted Jan. 1 through Feb. 28 each year.
Bill Roskob Foundation
Instead of offering scholarships or grants, the Bill Roskob Foundation offers interest-free loans to U.S. citizens. The application process is fairly straightforward. To qualify, you must:
- Be at least a second-year college student
- Attend an accredited higher learning institution in the United States
Applications are available from Jan. 1 through May 15 of each year.
Evalee C. Schwarz Charitable Trust for Education
Students showing outstanding academic achievement might be eligible for interest-free loans from Evalee C. Schwarz Charitable Trust for Education, established by a will. Undergraduate and graduate students are eligible, although you can’t be in law school. Here are the criteria:
- U.S. citizenship
- Fill out the FAFSA and demonstrate financial need
- Attending school in the state where you reside
- Show a high class rank and standardized test scores in the 15% nationwide
Applications must be postmarked by early spring and applicants are notified in June or July.
Military Officers Association of America Scholarship Fund
If your parents served in the military, or are eligible to be members of the Military Officers Association of America (MOAA), you might be able to get interest-free loans. In general, you must meet the following requirements to qualify:
- Be under the age of 24 (or up to 29 if you served in the military prior to college)
- Have a high school GPA of at least 3.0
- Male applicants must register for the Selective Service
- Sponsoring parent must pay dues to MOAA or Voices
MOAA provides up to $5,500 a year, and applicants are selected based on their academics, extracurricular activities, and financial need. An online application is available each school year. You can renew your loan application each year.
Massachusetts No-Interest Loan Program
For students who have been residents of Massachusetts at least a year prior to applying for the Massachusetts No Interest Loan Program, it’s possible to attempt to get help with no-interest student loans. Eligibility requirements include:
- Be a U.S. citizen or eligible non-citizen
- Apply for financial aid using the FAFSA and demonstrate financial need
- Register for Selective Service (if male)
- Have no defaults on federal or state student loans
- Be in enrolled full-time at a qualifying institution of higher learning
- Can’t have a bachelor’s degree
- Keep up satisfactory grades
You can receive between $1,000 and $4,000 a year for up to five years. Check with your Massachusetts school for specific deadlines and additional requirements.
The Scholarship Foundation of St. Louis
In addition to offering scholarships and grants, the Scholarship Foundation of St. Louis also offers interest-free student loans to about 500 students a year. Requirements include:
- Must be from the St. Louis metro area, living there for at least two years
- Earn a high school diploma (2.0 GPA) or a GED
- Attend an accredited non-profit institution for higher education
- Can’t be studying the ministry
- Can’t have a bachelor’s degree
Find out what you qualify for on MyScholarshipCentral.org, which can match you up with the right program. Loans are renewable up to $11,000, depending on financial need. Recipients are chosen based on academics, financial need, and other factors.
You can usually apply from Jan. 1 through April 15.
Hebrew Free Loan Association
The Hebrew Free Loan Association has subsidiaries all over the United States. For example, you can find them in Miami, Northeast Ohio, Pittsburg, and Northern California. These interest-free loans are available to qualified applicants for a variety of purposes, including education.
In most cases, you need to be a Jewish resident of the specific area, and demonstrate financial need. You might also need to have someone agree to guarantee the loan in the event you don’t make payments.
International Association of Jewish Free Loans
The International Association of Jewish Free Loans offers loans for just about any situation, including education, from the subsidiaries of this international association. You must be Jewish, and meet the local agency’s requirements. In many cases, though, you should have a regular source of income or someone to guarantee your loan in the event you can’t make payments.
Explore Your Options for Paying for School
Covering your college costs is likely to require advance planning and a combination of strategies. Apply for scholarships, save up what you can, and look into federal and private student loans. There are options once you graduate as well such as public service loan forgiveness programs, flexible repayment term options to take advantage of, and a grace repayment period that comes with many student loans following graduation.
While you’re in school, you may be able to participate in something like a work-study program, which doesn’t make your loans interest-free but can make it easier to repay them when you graduate. Even so, don’t forget to apply for interest-free student loans as well.